Those throughout the financial industry were watching the Financial Industry Regulatory Authority (FINRA) very closely in the months leading up to and immediately following the Securities and Exchange Commission’s (SEC’s) approval of considerable new rules and amendments affecting a variety of procedures and policies. Financial advisors and member firms were particularly concerned about how these newly adopted amendments and rule chances would impact the expungement of customer dispute information process. Although FINRA maintains that the primary purpose of collecting and displaying customer dispute information—even if such information is inaccurate, baseless, or exaggerated—on the publicly available BrokerCheck tool is to “help investors make informed choices about the associated persons and firms with which they may conduct business,” it does not investigate or verify the merit or legitimacy of customer complaints before making such potentially damaging information available to the public. Instead, it’s up to the individual financial advisor to pursue a formal expungement request using FINRA’s Dispute Resolution Services (DRS).
Under the newly amended rules, particularly FINRA Rule 12800 of the Customer Code, Rule 12805 of the Customer Code, and Rule 13805 of the Industry Code, fewer financial advisors qualify for expungement relief. Moreover, the expungement process itself tends to be more codified and difficult to navigate without the guidance and support of a highly knowledgeable and experienced securities law attorney. Now that these amended rules have been in effect for more than one year, it’s worth assessing how they have affected the expungement process for financial advisors struggling with a baseless or inaccurate (not to mention reputation-damaging) customer complaint. Let’s take a look at what some of the key changes were and how they have played out for financial advisors over the past year.
Understanding FINRA’s Enhancements to the Expungement Request Process
Of all the recently adopted rule changes to the FINRA expungement process, the establishment of a Special Arbitrator Roster was one of the most noteworthy updates. According to FINRA, the rules governing the handling of all straight-in requests are now subject to the following requirements:
- A panel of three arbitrators will be randomly selected from the Special Arbitrator Roster to decide the expungement request.
- The parties cannot agree to fewer than three arbitrators to decide the expungement request.
- The parties are prohibited from ranking or striking the arbitrators, stipulating to an arbitrator’s removal, or stipulating to the use of pre-selected arbitrators—the parties will not have any say in who will decide the expungement request.
- The three arbitrators must unanimously agree to award expungement based only on the narrow grounds specified in the rules (i.e., the claim, allegation is factually impossible, clearly erroneous, or false, or the associated person was not involved in the alleged misconduct).
Additionally, FINRA expungement eligibility requirements have become more stringent for those looking to expunge customer dispute information from BrokerCheck and the Central Registration Depository (CRD). The newly amended rules impose stricter time limits for seeking expungement, encourage more active participation from customers and their legal representatives during the expungement hearing process, and require notification of (and encouragement to participate in) expungement hearings to state securities regulators of all expungement requests filed in the DRS arbitration forum.
How to Have Customer Complaints Expunged Under FINRA’s Newly Amended Rules and Procedures
As many industry watchdogs predicted, FINRA’s newly imposed expungement rules appear to have limited the number of expungement requests filed by individual brokers and financial advisors. According to an article from May 2023, an advisor who filed an expungement request on October 16, 2023 (the same day that FINRA’s new guidelines took effect) was denied expungement relief because, under the new (and shorter) statute of limitations, the request cannot be granted. This case was one of the first tests of the newly revised system, and it aligns with many predictions of an increasingly competitive expungement relief request process. So far, some estimates posit that the number of expungement requests filed after the enactment of the new rules has dropped by roughly 15 percent. Additionally, those asking themselves the question, “How can I have customer dispute information expunged?” are also facing a more expensive landscape, as FINRA now requires three arbitrators instead of just one. While it’s yet to be determined just how significant these revisions to FINRA expungement eligibility and the larger FINRA expungement process will be, early signs indicate that fewer requests for expungement relief will be granted in the future.
How a FINRA Expungement Attorney Can Assist You
As a professional in the financial services industry, your reputation is everything. Learning that someone has made a baseless, inaccurate, or downright false customer complaint against you can be devastating, especially when this damaging information is easily accessible through BrokerCheck. However, before you assume the worst, it’s worth reaching out to a highly qualified and experienced securities law attorney to discuss the details of your situation and explore your possible options. Even though FINRA’s newly enacted rules may intimidate you into assuming that you will not qualify for expungement relief, it’s essential that you discuss your concerns with a dedicated and knowledgeable FINRA expungement lawyer so you can make fully informed decisions with greater certainty and confidence. Your trusted and caring attorney will help you understand your options and develop a sound legal strategy that maximizes your chances of securing the fair and favorable outcome you deserve.
Get Started With a Skilled and Trusted Securities Law Attorney Today
As an individual financial advisor, the prospect of wading through the nuanced and complex rules and procedures involved in the FINRA expungement request process can seem daunting and stressful. However, it’s essential to recognize that you do not have to move through this process on your own. With a knowledgeable and experienced FINRA expungement attorney by your side, you can trust that this dedicated legal advocate will look out for your best interests and work hard to secure you the favorable outcome you are looking for. Now’s the time to begin exploring your options so that you can safeguard your reputation and professional future.
In the wake of FINRA’s newly adopted rule changes, the expungement of customer complaints can be more challenging for financial advisors to navigate successfully. Reach out to Judex Law, LLC, today at (303) 523-4022 to discuss your options with a highly experienced and knowledgeable securities law attorney who will work hard to secure you a fair and favorable outcome.
